Bitcoin (BTC), The Fed & S&P 500 (SPX) – FinTwit Trends to Watch

Bitcoin continues to trade within a defined support and resistance band Rates markets awash with speculation as yield curve flattens

U.S. equities fall from record highs

ELON MUSK’S SOCIAL MEDIA SHENANIGANS DIRECTING BITCOIN (BTC)

Bitcoin pushed above the $40000 mark this week after tweets from Tesla CEO, Elon Musk helped boost the cryptocurrency. In his tweet, Mr. Musk eluded to the fact that Tesla may restore the use of Bitcoin as a payment method should energy sources used in BTC mining come from renewable basis’.

In other news, the FBI managed to track down the physical identity of cyber criminals who received $2.3 million worth of Bitcoin. This could significantly dent the anonymity associated with the digital currency going froward.

Bitcoin price action has been comparatively subdued of recent with the daily chart exhibiting a rectangle pattern (yellow). This pattern gives market participants hopes of a potential breakout either above or below the rectangle. While many analysts believe in further upside, traders should look for a confirmation breakout before favoring any directional bias.

Bulls will be looking for the recent swing high as initial resistance at $41303.6 while Saturdays low at $34659.6 will hold as support.

BITCOIN (BTC) TECHNICAL ANALYSIS

EUR/USD Faces First Oversold RSI Reading Since February 2020

EUR/USD trades to a fresh monthly low (1.1867) as it extends the series of lower highs and lows following the Federal Open Market Committee (FOMC) interest rate decision, and recent developments in the Relative Strength Index (RSI) warn of a further decline in the exchange rate as the indicator

pushes into oversold territory for the first time since February 2020.

EUR/USD FACES FIRST OVERSOLD RSI READING SINCE FEBRUARY 2020

EUR/USD trades below the 200-Day SMA (1.1992) for the first time since April as Federal Reserve officials forecast two rate hikes for 2023, and speculation for a looming shift in Fed policy may keep the exchange rate under pressure as Chairman Jerome Powell and Co. continue to boost their outlook for the US economy.

In contrast, the European Central Bank (ECB) appears to be in no rush to switch gears as “the Governing Council expects net purchases under the PEPP (pandemic emergency purchase programme) over the coming quarter to continue to be conducted at a significantly higher pace than during the first months of the year,” and it seems as though the ECB will support the Euro Area throughout the remainder of the year as Chief Economist Philip Lane insists that the central bank is “not ready to go anywhere near tapering or anything like that at the moment.”

In a recent interview with Bloomberg TV, Lane emphasized that “where the United States is today and where the euro area is are so different, both in terms of the stage in the pandemic recovery,” with the Governing Council member delivering a dovish forward guidance amid “the fact that the inflation outlook remains quite subdued.”

It seems as though the ECB is on a preset course as Lane argues that it will be “a multi-year challenge” to achieve its one and only mandate for price stability, and the deviating paths for monetary policy casts a bearish outlook for EUR/USD as the FOMC pledges to “give advance notice before announcing the decision to taper.”

EUR/USD RATE DAILY CHART

S&P 500 Risking a Pullback in the Week Ahead

Quadruple Witching Keeping Equities Static as Volatility Picks Up Seasonals and Risk Barometers Points to Pullback

Over the past 24-48hrs, market volatility has at last picked up (thank you Fed), USD shorts are feeling the squeeze as popular reflation trades take a hit, while the precious metals complex had also come under heavy pressure. That being said, interestingly, this has not spread to the equity space with US equities remaining relatively stable. The Nasdaq 100 even rose to a fresh record high as US yields dropped to pre-FOMC levels as the 10yr trades south of 1.5% again. The somewhat surprisingly steady nature in equity markets could possibly be explained by quadruple witching, which happens on the 3rd Friday of every quarter (March, June, September, December).

During quadruple witching days, single stock option & futures, index futures & options expire. Typically, on these days, the simultaneous expiration can result in large volumes, raising the risk of abnormal price action. As I noted above, equities have been somewhat stable, one of the effects of quadruple witching is that security prices can be pinned to a certain strike price at expiration.

Now once quadruple witching is out of the way, there is a risk that equity markets may begin to soften, perhaps a delayed reaction to the FOMC’s hawkish twist. Keep in mind that we are also heading into a seasonally weak period for the equity space. Looking a seasonal chart, dating back to 2009, the S&P 500 tends to soften in the second half of the month.

S&P 500 Levels to Watch

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